Three people have been arrested after an alleged arson attack on an iconic Melbourne CBD bar.

Police were notified when Melbourne City Council staff spotted a suspicious vehicle on safety cameras near the corner of Flinders and AC/DC lanes.

When police arrived at the scene they found the late night venue Bar Bambi on AC/DC Lane ablaze.

Police chased down two alleged offenders on foot before arresting a third person in a nearby laneway.

The trio are in custody and will be interviewed today.